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Statutory Interpretation - 'Reading Text In'

. 1048547 Ontario Inc. v Dairy Farmers of Ontario

In 1048547 Ontario Inc. v Dairy Farmers of Ontario (Div Court, 2023) the Divisional Court dismissed a JR argument that to read the text of Daily Farmers of Ontario (DFO) regulations as requiring that their "Milk Utilization Verification" be in fact 'verifiable' was 'unreasonable'. The court did this (in part) on a straight-forward purposive 'modern principle' statutory interpretation application:

The Tribunal’s decision that the DFO can invoice the Applicant at the highest class price when its MUV declarations cannot be verified was reasonable

[16] The Applicant argued that having submitted MUV declarations, the DFO had no authority under s. 24(2) of the DFO Regulation to charge for milk usage at the highest rate. The Applicant submitted that a plain reading of s. 24(2) meant that only milk processors who produce no MUV declarations are subject to being billed at the highest rate for purchased cow milk, and that s. 24(2) does not require that the MUV declarations be verifiable.

[17] Section 24 of the DFO Regulation provides:

24(1) Every processor shall, in respect of each month,

(a) complete a milk utilization report through the Milk Utilization Verification (MUV) system; and

(b) submit to DFO such milk utilization declarations through the MUV system, by the seventh day of the next following month or the next business day when the seventh falls on a holiday or weekend.

(2) Subject to subsection (3), where a processor fails to comply with subsection (1) in respect of any month,

(a) all milk supplied to the processor in the month shall be deemed to have been utilized by the processor as Class 1(a) for fluid milk processors or the highest class utilized in the prior month for industrial milk processors, and

(b) the processor shall pay DFO for the milk at the price referred to under subsection 2(a).

(3) Upon receipt of the milk utilization declaration mentioned in subsection (1), DFO shall adjust the amount determined under subsection 2(b) in a subsequent month in accordance with the utilization of the milk as declared.

[18] The Applicant submits that the Tribunal acted unreasonably and erred in law by giving an unreasonable interpretation to ss. 24 (1) and (2) by effectively reading the word “verifiable” into s. 24(1) and 24(3) of the DFO Regulation, relying on “a basic principle of statutory interpretation that the court should not accept an interpretation which requires the insertion of extra wording where there is another acceptable interpretation which does not require any additional wording”: Friesen v. Canada, 1995 CanLII 62 (SCC), [1995] 3 S.C.R. 103, at para. 27.

[19] We disagree. The Tribunal properly understood its task in interpreting s. 24 of the DFO Regulation, noting at para. 89, the “additional instruction” from Vavilov, at para. 121:

The administrative decision maker’s task is to interpret the contested provision in a manner consistent with the text, context and purpose, applying its particular insight into the statutory scheme at issue. It cannot adopt an interpretation it knows to be inferior – albeit plausible – merely because the interpretation in question appears to be available and is expedient. The decision maker’s responsibility is to discern meaning and legislative intent, not to “reverse-engineer” a desired outcome.

[20] The Tribunal considered the overall scheme of the Milk Act, the purpose of the legislation and the words used in the section. It found that s. 24(2) must be read in the overall context of the “milk supply management plan” in Ontario (para. 91). At para. 92 the Tribunal stated that the purpose of s. 24 is “to provide a self-reporting system that is fair to all, especially dairy farmers who must sell their milk to DFO, ensuring that they receive proper compensation based on the end use of that milk.”

[21] The Tribunal heard and accepted the evidence from audit witnesses that the accuracy and verifiability of processor declarations is fundamental to the system’s objectives of ensuring a fair return to producers and equitable treatment of processors. A milk processor that is not able to verify its milk usage declarations undermines the objectives of the system. A processor that pays for milk based on actual, verified usage should not have to compete with a non-compliant processor that benefits unfairly from price discounts. This evidence about the importance of accurate, verifiable MUV declarations informed the Tribunal’s analysis of the statute and regulations.

[22] The Tribunal reasoned that the MUV system can only function properly where processors’ MUV declarations can be verified by audit. The Tribunal found that this is the only reasonable interpretation of how s. 24 is to be applied, given the critical role of verifiable MUV declarations in driving the milk supply and compensation system. The Tribunal concluded, at para. 97, that “[i]f the declaration is not verifiable, it is not a declaration and section 24 must be read with that interpretation.”

[23] Consistent with the long-standing directive of the Supreme Court of Canada in Maple Lodge Farms v. Government of Canada, 1982 CanLII 24 (SCC), [1982] 2 S.C.R. 2, at p. 7, the Tribunal interpreted s. 24 of the DFO Regulation in a manner that would give effect to the scheme intended by the legislature, avoiding a “narrow, technical construction.” Or, as the Ontario Court of Appeal put it in Wilder v. Ontario Securities Commission (2001), 2001 CanLII 24072 (ON CA), 142 O.A.C. 300 (C.A.), at para. 23, “[a] court should be loath to prefer a rigidly narrow and literal interpretation over one that recognizes and reflects the purposes of the Act.”

[24] In our view, therefore, the Tribunal’s conclusion that s. 24 requires verification of the information provided in MUV declarations is reasonable. While we agree that courts and tribunals should not lightly engage in reading additional words into legislation, in our view there is no other “acceptable interpretation” of the DFO Regulation: Friesen, at para. 27. Section 24 itself states that it is a Milk Utilization Verification (MUV) system” (emphasis added). The audit powers granted to the DFO exist in order to allow for verification and ensure compliance with the overall scheme of the DFO Regulation and the supply management system. Verifiability of MUV declarations is essential to the effective operation of the regulatory scheme, which involves self-reporting and the need for verification – “trust but verify”, as counsel for the DFO put it.